Correlation, Causation, and Communism (Alliteration Win!)

——Curses, this post was going to be beautiful, masterful I tell you. The cornucopia of graphs and charts I had prepared was a visual feast fit only for the gods – till the intricacies of the WordPress blog interface cut short my hubris of reaching for graphical divinity. The WordPress dark arts have conspired to prevent me from posting images of any kind. This is but the opening salvo in a long, merciless war, I can promise you (“you” being the aether of the internets), but for now I will truncate my post into a text-only form, as those ancient philosophers who wrote articles before Google Images once did.

——Anyway, I read an old detritus of academia, linked on Brad Delong’s blog, about the Soviet economy and the (very real) foibles and follies of their system. it was written in 1991, before the collapse, and has the structure of an “advice” piece, recommending certain reforms. Like all good essays, it has a quote, summarizing the inherent problems of the centralized, command economy: “The vast range of negative externalities induced by these decisions are as inherent to the Soviet-type system as the ability to mobilize and focus resources. These externalities include damage to the capability of users to produce, unusable output forced on others in the system, destruction of the resource base due to improper exploitation (…) and more.” I’m a touch sad that the author didn’t write this in 2010, since the irony is only available in hindsight – but really, “Damage to the capability of users to produce”? “ unusable output forced on others in the system”? “destruction of the resource base due to improper exploitation”? I hope Im not a bad person for laughing at how accurate a statement that is about the current economic crisis in the United States. A massive surge in houses that people cannot even afford to live in, let alone want, a large decline in output because of cyclical collapses in demand, and the environmental issue is too obvious to even comment on.

——I’m not actually saying the author’s conclusions are at all incorrect – the communist system of the USSR was definitely overburdened with bad allocations of resources and an inability to control the negative externalities associated with industrial production, such as environmental protection, as well as a systemic inability to obtain information on why such problems were occurring due to their price systems. I’m too lazy to look up links, but if I recall my readings correctly, there is a lot of evidence to suggest that, in the 1980’s, the USSR had to import food not because its agricultural sector couldn’t produce the wheat, but because the price of meat, particularly beef, was undervalued relative to wheat and other agricultural products. So everyone produced cow feed instead of human feed, to exploit the arbitrage. A massive price failure with dire consequences. However, as we have clearly seen, these kinds of problems are also endemic to capitalism, maybe not to the same extent, but certainly on a massive scale. These problems are a consequence of people being people. Its a part of human civilization, the classic problems of imperfection. This is a mistake very often made, a kind of correlation equals causation attribution error. People see a system, and see problems in the system, and attribute those problems as being caused by the system. Sometimes that is true – but very often people don’t realize how widespread those problems are, how they were around before the system, and in places with different systems. The connection just isn’t there.

Of course, if we had a truly free market, none of these problems would occur, right? …Right?